Tougher times for Britain's small army of buy-to-let investors have seen the UK tumble down the rankings of the best places to invest in property in Europe.

British landlords have seen average yields plummet 19 per cent over the past year following an onslaught of tax changes, leaving the UK crashing 10 places in Europe's buy-to-let ranks.

Research by payments firm WorldFirst ranked the average yields available on buy-to-let investments, as measured by rent as a percentage of property values, across Europe and found that Britain had fallen from 15th place in 2016 to 25th in the space of just 12 months.

British landlords have seen their yields plummet 19 per cent over the past year

It follows 18 months of relentless change for British landlords who have had to absorb a 3 per cent stamp duty surcharge on all new property purchases since April last year and began to see their tax relief on buy-to-let mortgage interest cut back this April.

Mortgage lenders have simultaneously cracked down, demanding more rent to cover buy-to-let mortgage payments at the start of this year while landlords with four or more properties will find it tougher to get finance from the start of next month.

At the same time the UK has begun negotiations over its exit from the European Union and the pound has tumbled to near 30-year lows.

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Against such a backdrop, the WorldFirst report shows that British buy-to-let yields have, on average, fallen from from 4.91 per cent to 4 per cent over the past year.

In London and the South East where property prices are the highest in the country, yields can be less than 2 per cent.

On properties with multiple tenancy agreements in place however, landlords suggest it's still possible to reap returns closer to 8 or 9 per cent in some areas further north.

Separate research from Nationwide Building Society meanwhile suggests one in ten landlords expects to pay an additional £300 to £500 a year as a result of the recent tax changes to buy-to-let.

A similar proportion anticipate losing between £501 and £1,000 a year while 4 per cent expect additional costs of between £1,001 and £2,000.

Edward Hardy, economist at WorldFirst, said: 'The correlation between a country’s housing sector and the health of the wider economy is clear.

'It may now be the case that the deteriorating dynamics of the UK’s rental market is sounding the alarm for a wider slowdown in residential housing and thereby broader economic wellbeing.

'While the UK remains in a purgatory-like state between EU membership and Brexit, long-term investment decisions have become increasingly difficult to make and falling returns for property investors could mark the beginning of the end for one of the UK’s most successful investment avenues of the past 25 years.'

WHERE TO INVEST IN BUY-TO-LET IN EUROPE FOR THE BEST RETURNS

2017 Rank

2016 Rank

Country

Average Rental Yield

1

1 (-)

Ireland

7.08%

2

8 (+6)

Malta

6.64%

3

3 (-)

Portugal

6.43%

4

2 (-2)

Netherlands

6.27%

5

9 (+4)

Slovakia

6.12%

6

4 (-2)

Belgium

5.96%

7

6 (-1)

Turkey

5.91%

8

7 (-1)

Bulgaria

5.77%

9

11 (+2)

Cyprus

5.70%

10

5 (-5)

Hungary

5.59%

11

10 (-1)

Latvia

5.44%

12

16 (+4)

Spain

5.39%

13

12 (-1)

Poland

5.34%

14

13 (-1)

Romania

5.17%

15

14 (-1)

Denmark

5.08%

16

22 (+6)

Slovenia

4.59%

17

18 (+1)

Estonia

4.55%

18

20 (+2)

Finland

4.52%

19

17 (-2)

Czech Republic

4.47%

20

19 (-1)

Greece

4.40%

21

21 (-)

Lithuania

4.22%

22

24 (+2)

Luxembourg

4.21%

23

28 (+5)

Italy

4.08%

24

23 (-1)

Germany

4.03%

25

15 (-10)

UK

4.00%

26

25 (-1)

Austria

3.91%

27

27 (-)

France

3.82%

28

26 (-2)

Croatia

3.82%

29

29 (-)

Sweden

3.03%

Source: WorldFirst

Where are the best returns on offer?

Yields in Ireland are the highest in Europe for British investors looking to put money into buy-to-let, with the average rental yield rising to 7.08 per cent this year from 6.54 per cent in 2016 driven by strongly rising rents in the country's urban centres.

Considering buy-to-let? Read our top ten tips

This is Money's Ten tips for buy-to-let round-up has been helping landlords for more than a decade.

It is regularly updated and includes the essential things you need to think about before investing in property.

The average rent for a one bedroom apartment in an Irish city soared to over £12,000 this year, making it the second most expensive country in the EU in which to rent after Luxembourg, which costs city renters over £14,000 a year.

While agreed property prices have seen an increase, they have remained closer to their European counterparts with the average cost of a one bedroom apartment in an Irish city costing just over £168,000.

Malta, Portugal, Netherlands and Slovakia emerged as the next European hot spots with yields over 6 per cent. All four countries have relatively low property prices yet rental averages provide an opportunity to earn a decent income.

In London and the South East where property prices are the highest in the country, yields can be less than 2 per cent

Also sitting at the bottom of the table are Sweden, Croatia, France and Austria, all providing returns of less than 4 per cent due to high property prices and stagnant rents.

Sweden takes last place for the third time due to its tightly controlled rental market.

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